Revi wrote:Whatever your political persuasion, it seems like a bad decision to me to sell a real asset.

Oil is a commodity. The SPR itself is a real asset. We can refill the SPR, assuming we don't sell it as a "real" asset, with royalties taken in kind, exactly as Cog said. It is also contained in leases of all types, if the landowner wants that 1/8th delivered as commodity, hey, the company will do it.

Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0

WASHINGTON D.C. (Bloomberg) -- The U.S. is poised to sell half of its emergency oil reserves to help pay its bills, something critics say defies the reason the stockpile was created decades ago as a hedge against supply disruptions.

The spending deal that passed both houses of Congress and was sent to the White House early Friday calls for selling 100 MMbbl from the Strategic Petroleum Reserve by 2027. Combined with other sales approved last year, that would mean the volume of oil in the reserve would fall by 45%, to about 303 MMbbl. The White House said President Donald Trump will sign the bill Friday morning.

"This is the biggest non-emergency sale in American history," said Kevin Book, managing director of ClearView Energy Partners in Washington. "This is nothing short of liquidation of a safety net."

At today’s oil price of about $60/bbl, a sale of 100 MMbbl would raise $6 billion. But it’s impossible to determine exactly how much money the government would raise with the proposed sales because oil prices fluctuate wildly and the budget plan calls for the sales to take place between now and the fiscal year that ends Sept. 30, 2027.

The stockpile is kept inside a network of underground caverns and storage tanks along the U.S. Gulf Coast and has a capacity of 700 MMbbl, making it the world’s largest supply of emergency crude oil. It was created in 1970s after the Arab oil embargo sent prices skyrocketing and forced Americans to ration gasoline, but has more recently become Congress’s go-to piggy bank, used to fund everything from roads to drugs to deficit reduction.

Past drawdowns approved by Congress have included 25 MMbbl to pay for a medical research bill in 2015 and 66 MMbbl to pay for transportation legislation in 2016. A draw down of 7 MMbbl, worth an estimated $600 million, helped pay for a package of tax cuts passed by Congress in December.

Emergency uses have included sales after Operation Desert Storm in 1991, Hurricane Katrina in 2005, and an oil-supply disruption in Libya in 2011. It was also tapped last year after Hurricane Harvey left refiners in Texas and Louisiana unable to secure crude. "This is a good example of why we need an SPR," Energy Secretary Rick Perry said at the time.

The last drawdown, a congressionally mandated sale in September 2017, fetched an average $47.45/bbl, while the one before that drew $53.88/bbl. Both sales yielded significantly more money than the government paid for the existing reserve oil, some of which is decades old. According to the Energy Department, the reserve’s inventory cost an average $29.70/bbl.

With the U.S. awash in crude oil produced at home, some in Washington have questioned its usefulness, including Trump, who proposed drawing down half of it in his budget request last year -- a move the White House estimated would raise nearly $17 billion dollars.

"A smaller SPR is projected to be able continue to meet international obligations and emergency needs," the White House said in its budget proposal.

The spending bill also reduces the reserve’s legal minimum inventory level to 350 MMbbl, from 450 MMbbl. Since Congress began selling off the reserve to fill budget holes in 2017, it has not authorized the Energy Department to replace any of the crude.

Energy Undersecretary Mark Menezes said in an interview Thursday that the reserve was not intended to be "a government ATM."

"My own view is that SPR was put in place as an energy security mechanism to ensure that we had supply," Menezes said.

He’s not alone.

"Selling the SPR to cover non-energy budget expenses is deeply short-sighted and unwise," said Bob McNally, president of consultant Rapidan Energy Group in Washington and a former senior energy official at the White House under Republican President George W. Bush. "In 1996 and 1997 we sold SPR barrels to pay for unrelated budget expenses and I was in the White House when we put those barrels back at higher prices starting about five years later, after 9/11."

The pending budget bill also authorizes $350 million in sales to help pay for efforts to modernize the stockpile itself -- a sign Congress doesn’t want to completely do away with the emergency oil supply.

"The SPR is only effective if it can get its petroleum to market quickly and efficiently in the event of a supply emergency," said Robbie Diamond, president of Securing America’s Future Energy, a group aiming to pare U.S. dependence on oil. "Geopolitical risk is alive and well in the oil market, and the SPR is America’s only formal short-term line of defense against oil supply disruptions and price spikes."

I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.

2. The SPR mandate was to supply 90 days of Net crude imports, so as US imports fall the size of the SPR can be reduced. See Obama era report on reducing SPR volumes, Trump is just supersizing the reduction based upon falling US imports.

"As a member of the IEA, the United States has two primary obligations:1. As a net oil importer, the United States must maintain crude petroleum and petroleum productstock inventories, whether held by industry or government, equal to at least 90 days of netcrude petroleum and petroleum product imports. Of the 29 IEA members, 25 other netimporters have the same obligation. The remaining three members—Canada, Denmark, andNorway—do not have a stockholding obligation because they are net oil exporters.2. The United States must be able to contribute to an IEA collective action based on its share of IEAoil consumption. This obligation can be met by any measure a member nation may choose,including release of strategic or commercial stocks or demand restraint. As of October 2015,the United States must be prepared to contribute 43.9% of the barrels released in an IEAcoordinated response."

I think Trump and Clinton share the same goal: a balanced budget. Clinton achieved his goal after a million-man reduction of the US Armed Forces. It was quite an accomplishment, except the expected "Peace Dividend" never materialized. Instead we had the "Arab Spring" and 9/11/2001.

FWIW, I agree that this is a mistake, unless Trump also pursues a military modernization plan that makes our Armed Forces less dependant upon petroleum. That might be the other side of this coin, and it might not.

Either way, the Doves were eaten by the Hawks, although as some are being consumed, they are still screeching.

The self-proclaimed 'King of Debt" wants to balance the budget? By reducing taxes, adding to the deficit, building the wall and rebuilding the military? That would be some trick. Squeezing a few $billion out of the SPR certainly won't help much.

Blessed are the Meek, for they shall inherit nothing but their Souls. - Anonymous Ghung Person

Ghung - "The self-proclaimed 'King of Debt" wants to balance the budget?" Does it really matter what the POTUS really wants? Last week the congressional R's and D's shit all over the budget they had been pissing on for the last 9 years. Do we need to remind folks that during President Obama's terms US debt about doubled from $10 trillion to almost $20 trillion. Who considers that running a balanced budget?

I laugh when the pendants say we just saw "bi-partnership". The R's and D's split the f*cking imaginary money pie. Like two bank robes splitting the loot. The only real winners are the "crooks". LOL.

ROCKMAN wrote:Ghung - "The self-proclaimed 'King of Debt" wants to balance the budget?" Does it really matter what the POTUS really wants? Last week the congressional R's and D's shit all over the budget they had been pissing on for the last 9 years. Do we need to remind folks that during President Obama's terms US debt about doubled from $10 trillion to almost $20 trillion. Who considers that running a balanced budget?

I laugh when the pendants say we just saw "bi-partnership". The R's and D's split the f*cking imaginary money pie. Like two bank robes splitting the loot. The only real winners are the "crooks". LOL.

Ding ding ding ding ding!!

Even if we give Obama a pass through, say, 2009, until it was clear the economy was in recovery mode -- it's not like the dems didn't run LARGE budget deficits the remaining 6 years. With sufficient votes from BOTH SIDES allowing that.

I get so sick and tired of BOTH sides proclaiming to be fiscal heroes and damning the other side as "the problem" re spending, and ESPECIALLY on fiscal prudence (i.e. standing for balanced budgets).

BOTH SIDES, over time, are FLAGRANTLY prone to spend far more than they take in via taxes. Arguing about the details is nonsense, given that reality. Whether it's a tax and spend and big government approach generally favored by the left, or a cut taxes and spend on "stuff we like" and to hell with everybody else approach generally favored by the right -- the result is a fiscal disaster over time.

And to me, the more both sides (and their cheering sections) claim the "other side" is the problem re the budget, the less credible they are.

If we only do one thing, I keep arguing for some kind of Graham-Ruddman style balanced budget amendment with TEETH, that forces at least balanced budgets except in times of "dire emergency" (say the recent financial crisis, a major war, etc). At least that way the deficit would tend to get smaller with inflation except in times of "dire emergency" instead of growing rapidly ALL THE TIME now.

What do we really get? Crickets re meaningful policy of debt control and endless spending. Of course, it's not like this is unique to the US. Look at Europe. Look at Japan with a debt to GDP ratio that makes ours look tame, even as they have a serious demographic problem (sooner than the US).

And all we keep do is electing spenders, because they tell people what they want to hear. I see no serious sense of responsibility re fiscal prudence anywhere when it comes to state or federal government. What could possibly go wrong.

(Sorry for the rant. I've seriously HATED this over-spending since I learned as an eight year old that the SS "Trust Fund" is just an IOU.)

OS - regarding that rant, I believe that there is a political theory that any democracy can only last around 100 or so years....it starts out well then people realise that they can vote for more and more benefits for themselves that the government can not afford, so more and more debt is taken on until the system collapses.

Like the dates for peak oil, the 100 years might be a little on the fast side in practice, but I do think the theory has a lot going for it.

Ed - With respect to your 100 year metric consider that with the exception of war the US didn't start CONSISTANTLY running large deficits relative to GDP until recently. Perhaps your clock should start around 1980. And perhaps 100 years is a tad optimistic. Here's our deficit history from 1790 to 2015:

ROCKMAN wrote:Ed - With respect to your 100 year metric consider that with the exception of war the US didn't start CONSISTANTLY running large deficits relative to GDP until recently. Perhaps your clock should start around 1980. And perhaps 100 years is a tad optimistic. Here's our deficit history from 1790 to 2015:

That graph makes meaning appear pretty simple, when you have a Republican President and a completely Democrat Congress post 1980 you get massive spending while both sides claim it is the other party's fault. Then in the 2010's you got the reverse with a Democrat President and republican congress pulling the same shenanigans. Seems like both parties are happy to spend like drunken sailors as long as they have the 'he made me do it' excuse to fall back upon.

There is also the factor that starting in 1965 there were a lot of unfunded mandates promised to people and eventually those bills started coming due, which certainly did not help financing. The one recent time things seemed to go well was when we had President Clinton D and Newt Gingrich R working together to balance budget problems, but that only lasted about 5 years of the last 40.

I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.

Tanada wrote:The one recent time things seemed to go well was when we had President Clinton D and Newt Gingrich R working together to balance budget problems, but that only lasted about 5 years of the last 40.

And I'll opine that despite both Clinton and Gingrich deserving kudos for helping make that happen:

1). A lot of that success was luck -- the "peace dividend" after the unraveling of the Soviet Union greatly helped make that short term success possible. That window ended in 2001.

2). The budget wasn't truly balanced. It was balanced on the books, but, for example, Social Security was already bleeding -- that just wasn't tracked annually as part of the ordinary budget counting process. However, the debts incurred are no less real UNLESS we decide to shaft future retirees re Social Security. (As we well might, as we continue to change the rules re how inflation is counted, tack on extra taxes, penalties, etc. The shafting is occurring, but it's very slow, lest the old voters get too angry short term. Same story, but much more flagrant, re Medicare.)

Outcast - " The shafting is occurring, but it's very slow, lest the old voters get too angry short term. Same story, but much more flagrant, re Medicare.) Not feeling too bad with my current deal. Turned 65 in 2016 but didn't retire until this last 31 Dec. Not going to complain about my Medicare. Felt I had good 100% private insurance while working. But now with Medicare (plus supplemental covering the 20% Medicare doesn't cover) I pay half of what I did for my company insurance. And a $187 deductible instead of $3,000. And no co-pays instead of $25-$50. And $1 to $3 prescriptions instead of $6 to $18.

Obviously the SS check doesn't compare to my old salary. But I'm not working 60+ hours a week either. LOL. Plus I have a little consulting gig. Of course having no debt, such as a mortgage, makes a huge difference, and allows us to not dig into our savings. OTOH I look at my 17 yo daughter and try not to imagine what her deal will be in 48 years.